Credit Trades Du Jour: Exotic, ‘Nonlinear’ and Private

The hunt for yield is taking Wall Street and investors into exotic territory—and that means an appetite for credit assets that are private, not easily tradable and often complex.

Putting together deals in what some dub “nonlinear finance” is a growth business for investment banks’ big bond-trading arms and is helping clear unwanted assets off some balance sheets. However, such private deals, which aren’t publicly traded and don’t have public credit ratings, are a challenge for regulators keeping track of the growth of shadow…